Innovative Engineering received a promissory note of $15,500 at 11% simple interest for 15 months from one of its customers. After 3 months, Union Bank discounted the note at a discount rate of 13%. Calculate the proceeds that Innovative Engineering will receive from the discounted note. (Round to the nearest cent)
A) $18,855.17
B) $16,495.62
C) $15,339.19
D) $12,456.22

Question

Quizplus · Accepted Answer

To calculate the proceeds, first find the maturity value of the note using simple interest: Maturity Value = Principal + (Principal * Rate * Time) = $15,500 + ($15,500 * 0.11 * 1.25) = $17,631.25. Then, calculate the discount using the bank's discount rate for the remaining 12 months: Discount = Maturity Value * Discount Rate * Time = $17,631.25 * 0.13 * 1 = $2,292.06. Finally, subtract the discount from the maturity value to find the proceeds: $17,631.25 - $2,292.06 = $15,339.19.

Innovative Engineering Received a Promissory Note of $15,500 at 11